As a new investor it is a challenge to pick the right stocks; usually, at the novice stage it is wise to go for the stocks with lesser asset value. Penny stocks are shares of companies that offer them at a value less than $3-$5 each. On the other hand, many people consider penny stocks as the stocks floated by companies with market value less than $200 million. Without remaining within any static definition, it is best to call penny stocks as the stocks from the lesser valued companies.
In the beginning, identifying hot penny stocks cannot be cakewalk but a bit of self research with effective inputs from the right portal might be useful. When you have already decided and set to go for the penny stocks, it is wise to check out a few stock message boards, newsletters and live stock analysis websites. While eyeing for the right penny stock to go for, it is advisable to initiate extensive research.
It has been noticed that penny stock carries more risk since stocks of lesser valued companies can be manipulated by few rich individuals with ease. The thumb rule in this case is to follow a reputable newsletter. Following instructions always works better than following the emotional drives. Here are the basics you need to follow while determining which penny stocks to buy:
Strong Price Movement
In case a stock shows considerable increase in price movements, it is wise to go for the penny stock.
Sound Business Model
Most of the companies toot their own horn and create strong publicity of their offers. It is better to identify the companies with strong growth and the model of business they follow. There are many micro-cap stocks that yield better returns in the long run.
ROE (Return on Equity)
It can be a major factor while analyzing or determining a stock. The net income earned as a percentage, determines the condition of a stock. Penny stocks that reflect a positive ROE can be future assets.
Insider Buying
When insiders of a corporation go for stocks of their own company, it is indeed a positive sign. The motivated employees and workers witness the inner policies and predict gain. It is always a good idea to go for such stocks.
Technical Analysis Indicators
Many of the newsletters provide predictions after vivid technical analysis. Technical analysis is carried on only after a study of Moving Average Convergence/ Divergence ratio. Thus the shares with a tendency of trading up can be marked.
Few of the best penny stocks to buy now are Cyber Defender (CYDE), Eastman Kodak (EK), Avino Silver and Gold Mines (ASM), Tri-Valley (TIV), Seven Arts Pictures (SAPX), MELA Sciences (MELA), MGIC Investment Corp (MTG), PMI Group (PMI), Primo Water (PRMW) and STEC (STEC).
While reading the online resources, it is advisable to check out few of the premium newsletters as well. The stock market is not static; rise and fall are within its integral dynamics. So, regular alerts can be helpful to unearth the accuracy behind each penny stock.
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